Yuan forwards touched a three-year high on speculation the central bank will let the currency strengthen faster to curb the quickest inflation in 32 months.

The People’s Bank of China plans to increase the yuan’s flexibility to cut the cost of imports and counter inflation, said Deputy Governor Hu Xiaolian, according to a transcript of an April 15 speech posted on its website yesterday. Consumer prices rose 5.4 percent in March from a year earlier, exceeding the government’s 2011 target of 4 percent, according to data released last week.

“We believe that domestic inflation pressures will provide enough reason for the yuan to appreciate faster,” said Pin Ru Tan, a strategist in Singapore at Royal Bank of Scotland Group.

Twelve-month non-deliverable forwards gained 0.2 percent to 6.3605 per dollar as of 4:57 p.m. in Hong Kong, reflecting bets the yuan will strengthen 2.6 percent in a year from the onshore spot rate, according to data compiled by Bloomberg. The contracts touched 6.3500 earlier, the highest since April 2008.

The central bank set the yuan’s reference rate 0.08 percent stronger at 6.5294 per dollar, the highest level since July 2005.

The yuan strengthened 0.08 percent to close at 6.5255 in Shanghai, according to the China Foreign Exchange Trade System. It touched 6.5244, the strongest level since the country unified official and market exchange rates at the end of 1993.

Premier Wen Jiabao said last week that flexibility in the yuan may play a role in efforts to tame rising prices. Central bank adviser Xia Bin said yesterday that while China needs gradual appreciation over the long term and current conditions aren’t conducive to overly fast gains, a one-off revaluation “can’t be ruled out.” His comments were published on the Sina.com website.

In Hong Kong’s offshore market, the yuan gained 0.2 percent to 6.5076 per dollar. The 0.25 percent premium over the onshore rate was the biggest in two months, according to data compiled by Bloomberg.

Billionaire Li Ka-shing’s Hui Xian Real Estate Investment Trust raised $1.6 billion in Hong Kong’s first yuan initial public offering after selling units at the low end of a price range, two people with knowledge of the matter said. The REIT will have a forecast yield of 4.26 percent, based on pricing assumptions presented in the company’s share sale document.